In re Richardson

557 B.R. 686

In re: David Allen Richardson, Debtor.

Case No. 4:13-bk-14257

United States Bankruptcy Court, E.D. Arkansas, Little Rock Division .

Signed April 19, 2016

John Alexander Flynn, Flynn Law Firm, Cabot, AR, for Debtor.

ORDER

Phyllis M. Jones, United States Bankruptcy Judge

Before the Court are the Objection to Proofs of Claim 7 and 8 of Portfolio Recovery Associates, LLC (“Portfolio”) and the Objection to Proof of Claim 9 of LVNV Funding, LLC (“LVNV”) filed by the Debtor, David Allen Richardson (“Debtor”).

In each objection, the Debtor argues that the claim was incurred in connection with a credit card that should be characterized as an open-end or revolving account subject to a three-year statute of limitations in accordance with state law. The Debtor further contends that each disputed proof of claim reflects debts incurred outside the three-year limit under Arkansas law and, therefore, should be disallowed because the debts are not enforceable against the Debtor.

Notice of the filing of the objections was given to Portfolio and LVNV along with a deadline for filing a response. Neither creditor filed a response. The objections were set for trial and the Court conducted a hearing on the objections on July 28, 2015, at which time the Debtor appeared through his attorney but neither creditor appeared.

Counsel argued the Debtor's position, but did not present testimony or other evidence. On December 4, 2015, the Debtor submitted a brief in support of the objections, and the Court then took the matter under advisement. For the reasons stated in the following discussion, the objections are overruled.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157, and these contested matters are core proceedings under 28 U.S.C. § 157(b)(2)(B). The following order constitutes the Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052, made applicable to contested matters by Federal Rule of Bankruptcy Procedure 9014.

BACKGROUND

The Debtor filed a voluntary petition for relief under the provisions of Chapter 13 of the United States Bankruptcy Code on July 30, 2013, and the deadline for filing proofs of claim was November 29, 2013. (Case No. 4:13–bk–14257, Docket entries 1 and 5).

Proof of Claim 7-1 was filed November 4, 2013, by creditor Portfolio in the sum of $4,448.66, and the basis of the claim is reflected as “credit card.” The proof of claim includes a summary with the following information: the entity from whom the creditor purchased the account was Sherman Acquisition LLC; the entity to whom the debt was owed at the time of the last transaction on the account was Chase Bank USA; the account holder's last transaction occurred June 11, 2010; the last payment was made June 11, 2010; and the account was charged off on December 31, 2010. (Case No. 4:13–bk–14257, Claims Register, Claim 7-1).

Proof of Claim 8-1 was filed November 19, 2013, by creditor Portfolio in the sum of $6,657.65, and the basis of the claim is reflected as “credit card.” The attachment to the proof of claim includes the following information: Portfolio purchased the account from SquareTwo Financial; the entity to whom the debt was owed at the time of the last transaction was Citicorp Trust Bank; the account holder's last transaction occurred on June 5, 2010; the last payment was made June 5, 2010; and the account was charged off on December 31, 2010. (Case No. 4:13–bk–14257, Claims Register, Claim 8-1).

Proof of Claim 9-1 was filed November 22, 2013, by creditor LVNV in the sum of $794.21, and the basis of the claim is reflected as “credit card.” The proof of claim contains the following information: LVNV purchased the account from Soaring Capital, LLC; the entity to whom the debt was owed at the time of the last transaction was Wells Fargo Bank, N.A.; the account holder's last transaction occurred on June 6, 2010; the last payment was made June 6, 2010; and the account was charged off by the original creditor on January 31, 2011. (Case No. 4:13–bk–14257, Claims Register, Claim 9-1).

The last transaction date listed for each of the three claims at issue occurred more than three years prior to the bankruptcy petition date of July 30, 2013, but less than five years prior to the petition date.

In addition to the foregoing information disclosed, each proof of claim conforms to Official Form 10, is executed by the creditor's authorized agent, discloses that no interest and fees are included in the total obligation, and demonstrates that the claim has been transferred and that it was filed by the claim transferee. No writings supporting the basis of the debts were attached to the proofs of claim.

DISCUSSION

A. Prima Facie Evidence of Validity and Amount of Claim

The first issue to be determined is whether the proofs of claim at issue in this case are prima facie evidence of the validity and amount of the three claims. A proof of claim executed and filed in accordance with the Bankruptcy Rules “shall constitute prima facie evidence of the validity and amount of the claim.” FED. R. BANKR. P. 3001(f). When a proof of claim complies with the Bankruptcy Rules and Official Forms, it is “evidence of the claim, not simply a ‘pleading containing arguments and assertions.’ ” In re Muller , 479 B.R. 508, 513 (Bankr.W.D.Ark.2012) (quoting In re Cluff , 313 B.R. 323, 330 (Bankr.D.Utah 2004), aff'd, 2006 WL 2820005 (D.Utah 2006) ). Thus, if the three proofs of claim at issue properly conform to the applicable Bankruptcy Rules, they provide prima facie evidence of the validity and amount of the underlying claims. Dove – Nation v. eCast Settlement Corp. (In re Dove – Nation) , 318 B.R. 147, 152 (8th Cir. BAP 2004).

If prima facie evidence of validity is established by the creditor through a properly completed proof of claim, “ ‘all the facts in the claim are presumed to be true unless disproved by some evidence to the contrary.’ ” In re Muller , 479 B.R. at 512 (quoting In re Cluff , 313 B.R. at 337 ). The presumption may be rebutted by the claim objector with proof that the claim fits within one of the exceptions to the allowance of claims set forth in Section 502(b) of the Bankruptcy Code. In re Muller , 479 B.R. at 514.

The Debtor asserts in his objection, and each proof of claim reflects, that each claim is based on credit card debt, and he further characterizes the debt as arising from an open-end or revolving account. The Advisory Committee Note to the current version of Rule 3001 sets out the applicable parts of Rule 3001 that must be complied with before claims related to open-end or revolving consumer credit agreements are entitled to the presumption described in Rule 3001(f). These include the following subsections of Rule 3001 : (a) (requiring conformity with Official Form 10), (b) (requiring execution by the creditor or an authorized agent), (c)(2) (requiring provision of a statement of any interest, fees, expenses, or charges), (c)(3)(A) (requiring summary of five specific pieces of information),¹ and (e)(1) (if the claim has been transferred, requiring the filing to be by the claim transferee). In re Crutchfield , 492 B.R. 60, 69–70 (Bankr.M.D.Ga.2013) (citing Advisory Committee Note 2012).

Each of the contested proofs of claim, as examined in detail, clearly supplies the five items required by Rule 3001(c)(3)(A), and also satisfies Rule 3001(a), (b), (c)(2), and (e)(1) as discussed by the Advisory Committee Note. Accordingly, the Court concludes that the three proofs of claim at issue precisely conform to the applicable portions of Rule 3001 and are, thus, presumed to be prima facie evidence of the validity and amount of each proof of claim.

B. Claims Based on a Writing

Because none of the claims attach a writing, the Debtor argues, among other things, that lack of evidence of a writing requires the application of a three-year statute of limitations to the debts. Before addressing the Debtor's specific arguments, the Court will address the issue of whether the Bankruptcy Rules required the creditors in this case to attach writings to the proofs of claim. To resolve the issue the Court must analyze the interplay between Rule 3001(c)(1) and Rule 3001(c)(3). Rule 3001(c)(1) provides: “Claim Based on a Writing. Except for a claim governed by paragraph (3) of this subdivision, when a claim, or an interest in property of the debtor securing the claim, is based on a writing, a copy of the writing shall be filed with the proof of claim.” FED. R. BANKR. P. 3001(c)(1) (emphasis added). Rule 3001(c)(3) then governs claims based on an open-end or revolving consumer credit agreement. Read together, Rule 3001(c)(1) and Rule 3001(c)(3) clarify that a claim based on a writing must include a copy of the writing unless the claim is for an open-end or revolving credit agreement described in Rule 3001(c)(3).

Furthermore, the Advisory Committee Note to Rule 3001 puts to rest any doubt about whether a claim for a credit card obligation is intended to be included under the Rule 3001(c)(3) exception to the requirement of a writing. It offers the following explanation:

[P]aragraph (3) specifies information that must be provided in support of a claim based on an open-end or revolving consumer credit agreement (such as an agreement underlying the issuance of a credit card ).... To the extent that paragraph (3) applies to a claim, paragraph (1) of subdivision (c) [which requires a writing] is not applicable.

FED. R. BANKR. P. 3001, Advisory Committee Note (2012) (emphasis added).

In short, a credit card claim is a species of an obligation arising under an open-end or revolving consumer credit agreement that is based on a writing but excepted from the requirement that the writing be submitted with the proof of claim.²

C. Applicable Statute of Limitations for Credit Card Debt

Having found that the three proofs of claim at issue are prima facie evidence of the validity and amount of each proof of claim...